Why the often adopted go to measure like loan waiver, increasing MSPs and DBT have failed to provide a holistic measure to address farm distress.
Published: October 4, 2019
The two main policy interventions repeatedly discussed to tackle farmer distress are loan waivers and minimum support prices (MSP). These policy interventions don’t recognize the fact that farmers are a heterogenous community and there is a difference between farmer dissatisfaction and distress.
Even though most economists agree that loan waivers are a bad idea, it has become a often go-to solution of policymakers. Loan waivers deplete state finances, undermine bank culture, and barely reach 20-25 per cent farmers who have access to institutional credit. The marginal farmers or labourers who depend on moneylenders are outside the ambit of any benefit.
The fact which is rarely considered by the policymakers is that MSPs will help only surplus producing farmers, but not net buyers of farm produce such as marginal farmers, farm labourers and urban consumers.
A 2015 report on Marketed and Marketable Surplus by IIM-A found that marginal farmers (up to one-hectare land) contributed only 5 per cent of marketed surplus rice and 4 per cent of wheat, even in the major rice and wheat surplus states. And they sold only 39 per cent and 25 per cent of their marketed rice and wheat to government agencies, compared with the 70 per cent and 90 per cent sold by large farmers.
Even the recommendations of the Shanta Kumar Committee observed that only 6 per cent of farmers gained from selling these crops to any procurement agency.
Direct Benefit Transfer
The new goto measure for policymakers is Direct Benefit Transfer (DBT). The DBT schemes ignore the inequality between farmers.
For Example, Telangana gave Rs 9,900/ha/season to all landowning farmers. As a result, the large landowners gained — not only from owning large tracts but in both seasons, since with irrigation they can cultivate in both Kharif and rabi seasons, while pure-tenants and labourers got nothing. Nor did women farmers get anything, few of whom own land.
Even Odisha announced that it will pay both farmers and labourers, but like Telangana, it will pay per household and not per person.
Both Telangana and Odisha have ignored women’s claims, and also the substantial evidence that it is income in a mother’s hands that greatly improves child nutrition and education, rather than income only in the father’s hands.
Model Questions Category: 068 - Issues Related to Direct and Indirect Farm Subsidies and Minimum Support Prices